BEIJING - Stock exchanges worldwide fell
on Monday following European election results that
punished the rulers who had agreed to the
German-backed austerity measures.

In
France, Francois Hollande won the presidency by
promising to reverse many policies of his
predecessor, thus scaring markets over the
uncertainty about what will come. In Greece, the
long-time fuse of the euro crisis, elections
simply didn't produce any clear result and had the
country teetering on the brink of political chaos.

Italy, where there were only limited
administrative elections, provided possibly the
worst warning sign. An executive from a large
industrial company, Ansaldo, was shot in the legs
in an

action bearing eerie
resemblance to those of the Red Brigades, the
terrorists who plagued Italy in the 1970s and
1980s.

It is not yet clear if Germany and
the economically virtuous northern countries, so
far scared of being dragged into the crisis of
their neighbors, will reconsider the draconian
economic policies they have been imposing on the
rest of Europe and will agree to start a careful,
expansive financial policy that could rekindle
growth in less virtuous European Union (EU)
countries.

In any case, short of a new
political and economic compromise between France
and Germany, the two main pillars of Europe, the
euro could easily wobble off the brink, dragging
the rest of the world economy with it. In this
case, Berlin could also be the first crushed under
the rubble of the ensuing economic earthquake.

Germany's longstanding worry with
expansive measures granted to its neighbors is
basically an ethical concern. The Greek case
proves to them that money conceded to restart the
local economy could be used just to line
politicians' pockets and expand unaffordable and
inefficient welfare schemes. To check those
expenditures, Germany or the EU should take the
political reins of those countries - something
that Berlin is apparently unwilling to do for two
reasons.

One, it is scared of ruling these
non-German countries with German methods (the only
ones, naturally, Germans know), something that
could rekindle never-forgotten anti-German
sentiment in half of Europe. Two, it is also
scared of giving up power to the EU bureaucracy,
pervaded by, in German eyes, inefficient officials
who could run Germany according to ineffective EU
rules, unfit for Germany.

Moreover,
whereas the failures of Germany's neighbors should
permit in theory a "German invasion of Europe",
why should economically sound Germany be punished
with a "EU invasion" that would hurt its political
independence and could corrupt Germany to the
level of the unethical and not virtuous nations?

It is hard to get out of this political
and cultural deadlock, and so far the only way
forward has been by trying to wiggle some
elbowroom for the survival of the euro zone - but
with no real long- or medium-term perspective.
Time is running short, and the shots in Genoa do
not bode well for the situation.

Curiously, in all this debate, one crucial
issue, which has been raised from time to time,
has failed to draw due attention. In Italy, the EU
country with the largest state deficit and thus
the one more likely to start a real euro meltdown,
economists like Paolo Savona and Francesco
Giavazzi have suggested the possibility of the
sale of state assets to achieve a one-time drastic
cut in the total amount of outstanding debts. This
would free resources from the payment of interest
on debts and get some cash for productive
investments.

The proposal has been
bitterly resisted by the political elites, who
fear the loss of their power, which is upheld by
their control and de facto possession of those
assets. It is hard to win them as they claim the
sale of state assets would be tantamount to making
the rich richer and the poor poorer - and would
jeopardize the power of the state. Here, ideology,
the right's concerns about national strategic
missions, defense of old privileges, and populist
slogans are all cast in one mold and very hard to
beat.

Yet perhaps, this is also a problem
of knowledge and of people's rights. In
California, Bill Mundell - the son of Robert
Mundell, who won the Nobel Prize for economics and
is known as the "father of the euro" - suggested
in a recent article about California [1] that it
should be first important to know what the state's
assets are and how much they are worth, with a
state balance sheet to assess them. This lesson
could then be moved from California elsewhere - to
Italy, for instance.

People have the right
to know this, and it could very likely help in the
current predicament, as the markets would feel
more confident once they know that,
notwithstanding 1.9 trillion euros (US$2.5
trillion) in Italian debts, Italy is not an
economic wasteland. Moreover, it could also help
create a popular sentiment of empowerment for the
common people, who have been feeling like innocent
victims of the mess that politicians created for
them.

They would know what the state has
(that is, they have), and only after that could
they decide what to do with it: sell it, don't
sell it, how to sell it, sell it in part or as a
whole, et cetera. This would not be the dreaded
fire sale of state assets, but a more tranquil
Italy could buy some time for Italy and the other
European countries to assess the new political
reality following the recent elections.

Could the idea of the son then help to
save what the father contributed to creating?

It is not clear, but it is clear that
France and Germany will take longer than just days
to establish a new political compromise and in the
meantime anything could happen.